Managing global R&D: investigating the organizational antecedents of frugal and advanced product innovation

The recent rise of frugal innovations, i.e. affordable, 'good-enough' product innovations, in emerging markets forces Western multinational enterprises (MNEs) to rethink their traditional business model of exploiting advanced products in these markets by adapting them to local requirements. Frugal product innovation is fundamentally different from advanced product innovation as known in Western countries as they are composed of limited functionality, good-enough performance, and come at a fraction of the cost of Western products. However, as the business model of Western MNEs in emerging markets has traditionally focused on those few people with similar purchasing power as in the West, they have missed to design strategies and structures to meet the requirements of frugal product innovation. The challenge for Western MNEs is therefore to find ways to respond to the needs of the resource-constrained customer in emerging markets while continuing to engage in innovation activities targeted at the regular, advanced customer in developed countries.
The purpose of this study is to develop theory on the international organization of research and development in the context of the fundamentally different characteristics of advanced and frugal product innovation. To this end, this study investigates how Western MNEs align their frugal product innovation activities with the demands of the advanced product development activities. Building on organizational learning literature, this study pursues a multi-level approach and seeks insights in the organization of both innovation types at the country, firm, and subsidiary level.